FinTech – The Next Big Revolution

September 14, 2016
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Being a HealthIT evangelist, when someone chooses to write on Financial Technology, it is indicative that FinTech is the talk of the town. And why shouldn’t it be? Fintech as a sector is bullish in India. Today, fintech is disrupting financial services just like e-commerce changed the face of retail, and is likely to have far more widespread impact on society and the Indian economy, both directly and indirectly. The total Fintech software and services market is valued at ~USD 8 billion, and is expected to grow at a CAGR of ~15 percent 2016-2020 (3X the global average growth). Driven by mobile proliferation, increasing emphasis on financial inclusion, and digital savvy consumers, financial technologies are here to stay. Given below are some of the key highlights of the sector:

Role of government in providing a supportive environment

It is fair to state that the government is enabling the right environment. Clearly the 2016 Union budget had a rural push – more of ATMs/micro-ATMs, increased allocation under the Mudra scheme, digital literacy, so and so forth. Between 2015 to 2020, the number of unbanked population is expected to cut down to half, driven by the Jan Dhan Yojna. With increased financial inclusion, Aadhaar having penetrated 93% of adult population, eKYC, digital signatures, and India Stack combining all three – the scope for FinTech companies, particularly the ones in the payments space is immense. Not to forget, the UPI, enabling easy payments and money transfer, will see more companies join in to solve mainstream and niche problems. All these have formed a strong foundation for the Fintech ecosystem to flourish in a way that India had never imagined.

FinTech start-ups – the blue eyed baby of the start-up ecosystem

With funds pouring in from Sequoia, Accel Partners, and Apis Partners, the FinTech start-up space is expected to witness a 2X growth in funding for the year of 2016. Mumbai, Delhi, and Bangalore would continue to be the prominent hubs – with ~73 % Fintech start-ups located here. After all, it means something when incumbents like Goldman Sachs scouts for an Indian Fintech start-up for investment!

Payments and wallets are the top segments, shortly followed by P2P lending platforms. After making their presence felt in the tier 1 cities, these businesses are now looking for market expansion in India. Newer segments such as AI/robotics-enabled financial advisory, and blockchain, are currently developing their businesses and tech infrastructure for a successful foray in the next 2-3 years.

Collaboration – a mark characteristic of the Fintech space

FinTech enables financial services become more customer-centric with the help of technology driven innovation. Large banks are viewing fintech as an enabler, and are collaborating/investing to fuel the start-ups in the space. Some of the examples are given below:

Banks

Collaborations/Investments

ICICI Bank

Conducted Appathon and shortlisted 10 from 2,000 applications and 3 winners to be given a chance to integrate their services on to the bank’s mobile banking platform to be offered to customers

SBI

Inked a deal with IIT-Bombay business incubator SINE to promote innovation by fintech startups

The overall Fintech market is expected to witness a 1.7X growth by 2020. Payments processing and trading solutions will have the highest market share (~55%). Demand is expected to pour in from both traditional (BFSI, Next Gen Commerce), and emerging sectors (telecom, media & entertainment). It is estimated that 60 percent of the adult population will use one or more forms of online financial service in their daily life, either for purchases or to access subsidies/services. With increasing online purchases and transactions, the number of mobile wallets are expected to increase 2X, paving our way towards a cashless economy.

For more such insights on the FinTech sector, and how Internet is enabling this sector grow and flourish, download our free report on ‘The Future of Internet in India’.